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Best option for buying gold


enoch01
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What's the best way, by which I mean least amount of trading friction, of buying gold?  ETF's, miners, purchasing a few coins myself and putting them under my bed?  I never thought I'd be asking this question, but have been growing more concerned about debt monetization and money-printing recently.

 

Thanks in advance, and feel free to try and talk me out of it, too.  I'm not convinced this is a good idea, just interested in options and learning.

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you might want to think about buying physical gold from a source like kitco.com

 

If you are making an investment, then I would suggest investing in some of the miners.

 

However, if you are looking at gold as insurance, I would suggest physically owning it.  Like FFH's credit default swaps (which they did with Citi, Barclays, Deutshe only and all with collateral requirements), insurance is only worth it if you are sure (or at least as confident as possible) that you can collect if the worst happens. If there is superinflation (somewhere between now and hyperinflation), its tough to say exactly what will happen to ETFs or gold mining stocks.

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The cheapest way if you buy physical gold or silver is to buy exchange deliverable bars. Go on the London Metal Exchange website and they will list which refiners are approved and the types of bars. Pretty bulky stuff however. Just for perspective, a 1,000 oz silver exchange deliverable bar weigh 63 pounds and is roughly 5 x 5 x 16 inches! You can buy them from Kitco (as mentioned) or at Scotia Plaza in Toronto.

 

Coins are the most expensive form vs gold/silver content and smaller bars are more expensive as well than the exchange deliverable bars.

 

Honestly, I would carry only a small portion of your total investment in gold/silver in physical form. This is only useful to survive if we have a complete breakdown of society.

 

If you don't believe in confiscation ala Roosevelt and believe that the world will survive then I am very comfortable with the Spider Gold Trust ETF or GLD. Ultra low cost, easy to get in and out and based on everything I read, it appears completely legit despite the claims from many gold bugs. John Paulson has something like 17% of his money into GLD. He has made a killing with credit default swaps so I imagine that he knows a thing or two about counterparty risk.

 

Central Fund of Canada is another interesting one, but it is half gold, half silver. It is a closed end fund and sometimes trades at a discount to NAV. It has been in operation for decades.

 

Regarding miners, they are levered to the price of gold and silver, but you have things to consider such as management, depleting asset base, cost, growth, hedging. If you pick the right producer, you can make money even if gold does not move. If you are wrong then you may see gold vastly outperform. In other words, you will have to spend as much time researching as for any other stock.

 

There is really no best option. It will be based on what you feel most comfortable with. Physical eliminates counterparty risk, but consider the negatives of storage, transportation and risk of damage.

 

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